Chrysler appeared poised to emerge from bankruptcy by early Wednesday after the United States Supreme Court declined on Tuesday to hear a challenge by three Indiana state funds and several consumer groups to the sale of most of its assets to Fiat.
The refusal by the Supreme Court to revisit the matter, after two lower courts approved the sale, removes the uncertainty posed by a decision by Justice Ruth Bader Ginsburg on Monday to halt the deal temporarily pending further review.
The decision by the Supreme Court, disclosed in a two-page order, made it clear that the justices were not ruling on the merits of the challenge by the Indiana funds, which had protested the government’s treatment of Chrysler’s secured lenders.
Instead, according to the order, the Indiana funds “have not carried the burden” of proving that the Supreme Court needed to intervene. “We are gratified that not a single court that reviewed this matter, including the U.S. Supreme, found any fault whatsoever with the handling of this matter by either Chrysler or the U.S. government,” the Treasury Department said in a statement.
“The Supreme Court really looks at big-picture issues with long-term dimensions,” said Evan D. Flaschen, the chairman of the financial restructuring group at Bracewell & Giuliani. “It’s clear they said, ‘we’re not commenting on the merits of Chrysler, and that this isn’t the type of case where we need to step in to clarify the law.’ ”
Representatives for Chrysler, Fiat and the Indiana state funds were unavailable for comment on Tuesday evening.
In spite of the one-day delay by the Supreme Court, Chrysler’s trip through bankruptcy has been astonishingly quick, taking a little over a month. The Obama administration had promised the reorganization would be efficient and controlled.
Even as Chrysler and Fiat awaited the Supreme Court’s decision, advisers for the two companies prepared the paperwork to close the deal as soon as possible. The two companies plan to complete the transaction by Wednesday morning, when the government wires money to finance the sale, according to people briefed on the matter. (Fiat is providing only its small-car technology as the base for a new line of Chrysler cars.)
Through the Fiat deal, Chrysler will slash its labor costs and debt levels, as well as gain a partner well versed in making and selling smaller, more fuel-efficient cars around the world. Under the government-backed plan, the carmaker would emerge from bankruptcy with a union retiree trust owning 55 percent, Fiat owning a 20 percent share that could eventually grow to 35 percent, and the United States and Canadian governments holding minority stakes.
Now Chrysler must contend with a brutal market place, with Americans largely shunning new cars. It also faces a potentially formidable foe: G.M., itself trying to slim down through a government-sponsored reorganization.
Chrysler won an additional concession on Tuesday, when a federal judge approved its request to terminate 789 dealer franchises immediately, a move the company said would significantly cut costs.
The decision, by Judge Arthur J. Gonzalez of the United States Bankruptcy Court in Lower Manhattan, overruled objections by scores of dealers, heard over two days of hearings occasionally punctuated by emotion.
Throughout its bankruptcy proceedings, Chrysler argued that it needed to close its deal with Fiat as quickly as possible. Lawyers for the company argued that it was burning through more than $500 million a week, as its plants sat idle and its suppliers needed payments to stay afloat.
The Indiana funds represent teachers and police officers and hold $42.5 million of Chrysler’s $6.9 billion in secured debt.
The funds have argued that they are receiving less compensation for their holdings — 29 cents on the dollar — than unsecured creditors like the United Automobile Workers, upsetting bankruptcy law. They have also argued that the government overstepped the bounds of a federal bailout by giving Chrysler money meant for banks.